But now the industry is in the death vice of an iron maiden of its own making as they are unable the push up the bill to the consumer to cover the four way whammy of rising interest rates, rising overheads, an increasing cost for environmental compliance, and in the case of many of them, swingeing fines for delivering the aforesaid terrible product.
The huge irony of all this is that it could have all been so easily avoided had Ofwat, the industry regulator, acted on their own recommendations of the early 2000’s. It was around that time that the water companies, having begun life in the private sector as publicly traded entities on the London Stock Exchange, began to be taken private, the transition largely financed by pension and sovereign wealth funds who saw the investment in monopoly utilities as proving a safe, steady return. Ofwat warned against this, noting that loading the companies up with debt as the private finance business model demanded, would eventually end in tears. And tears we have many as Ofwat, having sounded the alarm bell, turned a deaf ear to go along for the ride as the enabler-in-chief as the rapacious water companies pretty well did what the hell they liked.
So, what now? It interests me that, despite all the outrage, there seems little appetite for renationalising the water industry. Even Will Hutton, author of the New Labour playbook of the 1990’s The State We Are In wrote at the weekend that public ownership was not the answer. We do not have to look far to see why: in Scotland and Northern Ireland the industry remains in state control and Wales it is run on a not-for-profit basis and in none of those countries are the problems any less. For good or ill, whatever your political colours, it seems nobody has the appetite to tie up £250 billion in buying back a basket case.
The private model of ownership can work; indeed, it has to work because it is the only game in town. The trick will be to find a way that allows for profit to be made from all those things we so badly need: a modern sewage system that can cope with a population of 70 million not the 50 million the current system was designed for. Water provision that is similarly resilient, capable of coping with the vagaries of the British climate without sucking dry our rivers.
We need to give the water companies space to make money from what they are meant to do, rewarding productive investment whilst hammering miscreants. But that will take regulation of both the financial and environmental kind. Regulation that has been woefully inadequate for at least two decades. Ofwat and the EA should both hang their collective heads in shame – it is they who are responsible for the state we are in. |